Once-Hot App Viddy Returns $18 Million To Investors And Prepares A Final Attempt To Turn Around

Even Shakira invested in the once-hot app.

Last summer, social video app Viddy was in a much different place. It was in a battle to be the "Instagram of Video" alongside competitor SocialCam, and its number of users surged higher every day.

Viddy used that momentum to raise a $30 million Series B round from investors such as Khosla Ventures, NEA and Goldman Sachs. Even Shakira invested.

But the traffic was temporary. Viddy grew quickly on Facebook's platform, but Facebook cut off the traffic hose when news broke that people were getting spammed by social video apps. Viddy's executive team has all but left, including its CEO and its head of business development. In February, one-third of the staff was laid off.

Now, Viddy is giving itself one last go. It's returning $18 million to investors and keeping the remaining millions to try a few more product launches.

"Viddy raised a substantial amount of capital last year, during different market conditions,” Viddy's president, JJ Aguhob, told AllThingsD. “A year later, Viddy is a leaner, product-focused organization that is steadily growing its audience and will soon be releasing new products. Our late-stage investors have been very supportive, but it just makes good business sense to return capital we do not need and have a clean balance sheet in the process.”

Having to return all that cash isn't the most painful part of Viddy's story either. Last year, Viddy reportedly turned down a $100 million buyout offer from Twitter when the app was on the upswing.